Hecla/US Silver

Offer by Hecla (NYSE) for all the outstanding common shares of U.S. Silver (TSX, US OTCQX, Frankfurt) and all its outstanding warrants for a cash price of Cdn.$1.80 per share and Cdn.$0.205 per warrant, with U.S. Silver equity thereby being valued at Cdn.$112 million. Accordingly, it is recommended that U.S. Silver shareholders vote against the RX Gold arrangement. Offer price represents a 23% premium to the closing price on July 24, 2012. Conditions of offer include 66 2/3% of both the U.S. Silver common shares and warrants being tendered, the RX Gold arrangement not being approved, and no increase in break fees. An offer is not made for employee stock options.

Canadian taxation

A disposition of U.S. Silver shares or warrants under the offer will occur on a taxable basis. Discussion of potential Subsequent Acquisition Transactions includes a general discussion of an amalgamation and redemption transaction.

U.S. taxation

It is believed that U.S. Silver (a Canadian corporation) likely is or has been a United States real property holding corporation. However, a sale of shares of U.S. Silver to Hecla by a non-US holder should not be subject to US tax (assuming, as appears likely, that the shares of U.S. Silver are considered "regularly traded" on an established securities market within the meaning of s. 897 of the Code) unless such shareholder has directly or indirectly or constructively owned more than 5% of the interests in U.S. Silver (including stocks and options) at any time during the shorter of (a) the five-year period ending on the date of the sale, and (b) the period of ownership.

However, it is believed that the regularly traded test would not be satisfied for a Subsequent Acquisition Transaction, so that a non-US holder could recognize a gain even if the 5% test was not satisfied. In these circumstances, U.S. Silver would be required under Code s. 1445 to withhold 10% of the amount paid without regard to whether the 5% test was satisfied.